State eyes sixth tier

Published 12:20 am, Monday, March 7, 2011

ALBANY -- The Cuomo administration is examining ways to increase the cost of health insurance for state retirees who now use accrued sick leave to reduce their payments for the benefit.

The change comes less than two years after the state's major public employees unions agreed to a less-generous Tier V pension plan and as the administration is looking at establishing a Tier VI for even greater long-term savings.

Both moves represent efforts to find pension and health care savings from the public work force beyond the coming 2011-12 fiscal year, which begins April 1.

Any Tier VI plan would apply to public employees hired in the future, so the bulk of savings would only add up in decades in the future when those workers retire.

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But the health insurance cost savings could come sooner.

Number crunchers have been updating the actuarial tables used to calculate how much unused sick time state workers can allocate to help pay for their health insurance after retiring.

State retirees can accumulate up to 1,500 hours of unused sick time. They can't cash in the time upon retirement, but can take the money represented by the hours and allocate it toward health insurance costs, Civil Service Department spokeswoman Lori Chapko said.

Here's how it works: If a hypothetical state employee who earns $20 an hour retires at age 62 and has 500 hours of unused sick time, he can take the $10,000 that represents and apply it toward his health insurance, averaged out by his estimated future lifespan. Actuarial tables, or longevity predictions, show the average 62-year-old will live another 18 years, or 216 months.

That means he could apply $46 -- $10,000 divided by 216 months -- toward his health premium. The regular Empire Plan rate would be $69, or 10 percent of the monthly premium for an individual. Thus, that 62-year-old might only pay about $23 per month after sick time is factored in.

For family coverage, the cost would be 25 percent ($378) of a $1,514 premium on the Empire Plan, a popular public sector insurance plan. (Other details could impact those amounts.)

The state is exploring the idea of updating the sick time system by adjusting the actuarial tables, which haven't been changed since 1983.

Officials at the state Department of Civil Service wouldn't elaborate on details of the plan, but they acknowledge the new tables will reflect a longer life expectancy, or the number of months by which the unused sick time is divided.

That, in turn would decrease the amount that could go toward one's monthly premiums.

According to a memo that circulated last month, the sick time supplement could drop as much as 20 percent for those retiring between the ages of 55 and 58.

Unions are unhappy with the concept, and claim it may amount to a diminishment of retirement benefits, which they contend would have to be bargained.

The pending reduction comes as the Cuomo administration is attempting to finalize a Tier VI proposal that was one of the key recommendations from a special mandate relief study commission, which issued preliminary findings last week.

Unions such as CSEA and New York State United Teachers were quick to note Tier V has barely gotten off the ground since it went into effect at the beginning of 2010.

CSEA and another leading union, the Public Employees Federation, agreed not to oppose institution of Tier V in exchange for former Gov. David Paterson's pledge to hold off on layoffs until the end of 2010.

Tier V raises the full-benefit retirement age for many workers from 55 to 62, and limits how much overtime can boost a retiree's pension benefit.

That agreement ended on something of a sour note: Contending that unions resisted further givebacks amid a worsening budget picture, Paterson carried out nearly 900 layoffs as the agreement was expiring at the end of 2010.

Last week, state Director of Operations Howard Glaser warned that planning for up to 9,800 state layoffs -- a "last resort," he said -- would begin after April 1 if the state doesn't settle contracts with major state unions.

Cuomo is looking for $450 million in work force savings to help close a projected $10 billion budget gap in the 2011-2012 fiscal year.